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Ask HN: How have you achieved financial independence?

187 points by tsaprailis 10y ago

I know this is a niche question, but have you reached a point where you have enough passive income to not to have to work for a living? If so how did you accomplish it?

EliRivers 10y ago
I can pay my rent and bills from investment income and capital gain on investments. This is, of course, not remotely guaranteed, but over the last few years it's worked out. I do still work, though. I did it by putting large amounts of my income into low cost index funds focussing on various sectors, and some specific shares that I thought would do well.
- tsaprailis 10y ago
  Thanks for the feedback. Could you clarify if you only use the capital gains? I have read that dividend stocks are also a good way to have a passive income. Additionally have you thought about what you would do in case of a market downturn?
  - EliRivers 10y ago
    Currently, I don't use any of it. I keep track of the gains (which is how I know they outweigh my rent and bills), but because I still work, I pay the rent and bills out of wages and leave the investments alone. All my dividends get reinvested. I'm in the UK, and I've taken full advantage of the tax free savings scheme, currently allowing about 15000 GBP a year to be put into stocks and funds with no tax to pay on dividends or gains. There have been market downturns during the time I've done this (started around 2005). Generally, during a downturn, I scrape together as much spare cash as I can and invest it in things that seem cheap. April 2015 to April 2016 was something of a downturn, for example, and I ploughed extra money into the markets while prices were low.
  - n72 10y ago
    Dividend stocks are not a good way to have passive income. The benefit of the dividend is already priced into the stock, so they are no better than any other stock. Prefer, rather, to just go for good stocks and not worry about the dividend. If you need income, sell some stocks. Also, the % that you're pulling out of stocks should be determined by looking at, say, a 30 year window, not a very recent one. That is, if your savings can sustain a 2% withdraw every year, taking into account inflation, then take out 2% every year. Some years this will be less that your cap gains and some years more. The key is making a long term outlook. FWIW, these are some very brief thoughts of mine on investment: https://github.com/nickgieschen/investingguidelines https://github.com/nickgieschen/investingguidelines
    - EliRivers 10y ago
      "The benefit of the dividend is already priced into the stock, so they are no better than any other stock." I hear this sort of thing a lot, and in my experience, everything already being priced in isn't true (both of dividend stocks, and stocks not paying dividends). This relies on the efficient market hypothesis being broadly correct, and based purely on my own experience, it isn't. My findings are very much based on my own experience, but I have had no small success simply reading the news and seeing that a company is doing well or is looking at a brighter future, and buying shares in them and making a nice profit on it out of both increased share price and increasing dividends. The EMH suggests that it shouldn't work; that by the time I get round to buying the shares, the efficient market has priced all that in. But it just doesn't seem to be true, in my experience.
      - n72 10y ago
        You're talking about two different things: Stock picking and whether dividends are priced in. Because stock picking works for you (let's ignore the sample size issue), doesn't mean dividends aren't priced in.
        EliRivers 10y ago
        I believe that dividends are not priced in. The reason I believe this is not related to stock picking working for me. I believe it because the market is not efficient, and dividends being priced in relies on an efficient market. Any success I have in stock picking relies on this inefficiency; it's just a symptom.
        tonyedgecombe 10y ago
        If dividends weren't priced in then prices wouldn't dip when stocks go ex-dividend.
        EliRivers 10y ago
        Sometimes they don't. Sometimes they go up. Lots of people think they're priced in, and the point at which they go ex-dividend is a convenient point to decide that it's now worth a bit less. Was it "priced in" before? No idea. Going ex-dividend is a single, identifiable point at which people can say it surely must be worth less now. I personally value dividend paying stocks more highly than non-dividend paying stocks. A history of dividends makes the stock appear more valuable to me (given that the majority of companies are rubbish at investing in themselves, giving me the money and letting me reinvest it myself is preferable). If they just went ex-dividend, that's a excellent very fresh data point that makes the stock look more valuable to me.
- deleted 10y ago
  [deleted]
mikekchar 10y ago
I'm only responding because nobody else has replied to your thread. Feel free to ignore me if you think it is irrelevant. My favourite Dr. Who quote: "Work for? I don't work for anyone. I'm just having fun." Describes me, even though I receive money every month. My expenditures are considerably less than the money I receive every month by having fun. If I didn't receive money, then I would be in trouble, so I don't really qualify for your question, but I'm having fun so I'll answer anyway. Step #1. Reduce my expenditures below what most people consider reasonable. I lived for more than 5 years on less than $10K a year. It was much easier than I thought. I discovered that spending more than this amount of money, I was no happier. Who knew? What really counted was having so much more income than outgo that money became completely irrelevant to me. After I did that, I stopped worrying about working. There isn't a job in the 1st world that pays less money than I'm comfortable with. I started taking jobs that interested me instead of jobs that paid me money. Then I got married. That threw a monkey wrench into the works! But I'm slowly working thought that ;-) Honestly, people tie themselves to a grindstone to make as much money as possible because they think it will remove stress and give them a nice life. I don't think that works most of the time.
- tsaprailis 10y ago
  Thanks for your reply. I was thinking about the same, while I make more than I spend, and for the time being I can save money, this indeed requires working. The "problem" would start when you have depended family members and you cannot calculate, or rather plan for all expenses in advance, what have you done to plan for this?
  - mikekchar 10y ago
    Yes, this is a problem. I think the biggest thing I fear is poor health. I live in Japan which has a health care system, but it can still be quite expensive to be ill. Also, my wife and I won't have children probably, so while that saves money up front, I have nobody to look after me when I get old. Insurance is my main hedge against these risks. I try to follow a healthy lifestyle as well. I used to keep fish and it's amazing how much longer fish live when they aren't stressed. I try to replicate that. Finally I try to buy long term, low risk investments (like government bonds) with my excess cash. However, I keep a few years worth of money available in liquid assets for things like disability. Probably the biggest risk is getting a mental illness that isn't covered by long term disability insurance. I have no idea how to deal with that one :-( All of my skills to live simply may be useless if I lose the mental ability to use them.
Dragon256 10y ago
Forces pension, various websites, P2P lending (ZOPA, Funding Circle, Lend Invest, etc) and soon (hopefully) Bonds & shares via CrowdCube.
- tsaprailis 10y ago
  Thanks, do these provide a passive income or just capital gains?
malcolmocean 10y ago
I described this in pretty great detail over on IndieHackers (https://indiehackers.com/businesses/complice https://indiehackers.com/businesses/complice) and also answered a bunch of related questions on this HN thread: https://news.ycombinator.com/item?id=12269425 https://news.ycombinator.com/item?id=12269425 TL;DR = spent 20h/week for 2 years building a product that people wanted. But there are a lot of juicy insights etc in those links.
- tsaprailis 10y ago
  Thanks for the links, I will take a look. Your story seems like what I have in mind trying to replicate.
zen_boy 10y ago
Just turned 30. Invested most of my savings (20k€) into Bitcoin several years ago, and then converted everything to Ethereum in the pre-sale. Those 20k€ are worth roughly 1M€ pre-tax at the current rates. Started a fintech startup three years ago and we are close to a liquidation event that would net ~1.5M€ pre-tax. Right now, though, I have less than 10k€ in my bank account. Would be also really curious to hear how to convert that money into sustainable passive income. Spending 3k€ per month for the next 30 years would be about 1M€. Seems like having <5M€ is far from the "go bananas" type of wealth, but it can definitely be enough to achieve FI. Achieving ~4% annualized ROI after tax and inflation seems plausible in the long term: https://www.reddit.com/r/financialindependence/wiki/faq https://www.reddit.com/r/financialindependence/wiki/faq
- charlesdm 10y ago
  Is capital gains tax payable on those coins? If I were in your place, I would probably attempt to find a way to realise that gain (i.e. by relocating to a tax friendly country for a while) without having to pay capital gains tax. Make sure to not throw away your windfall.
  - zen_boy 10y ago
    In Finland, the capital gains on cryptos are realised once you sell them for floating currencies (ie. USD or EUR). We pay 34% tax on the profit. For example, I'd pay (1M€ - 20k€) x 34% = 333k€ of taxes on capital gains. I'm not sure how the taxation works if you try to dodge it by relocating to a more tax friendly zone. I've heard some horror stories about Finnish companies moving to Estonia for tax benefits only to be taxed with fines for the gains that the company made while it located in Finland. Would the same rationale apply for personal capital gains? You can freely trade between cryptos, for example between BTC and ETH, without triggering the capital gains. The moment you leave cryptoland, I believe they use the first-in-first-out (FIFO) principle to calculate the profits.
    - charlesdm 10y ago
      In Belgium (where I live), these gains are tax free. So that is one country you could potentially move to to avoid the tax. The same applies for the UK, Malta, Cyprus (non dom regime) and Monaco. If I were you, I'd consider doing the perpetual traveler thing for a while (i.e. while having a base in Malta, which is cheap) and cash out + reinvest in stocks. After a few years, move back, and then pay capital gains tax on those future gains. You can leave most countries without realising the capital gain, even if you've built it up within a country. This is why certain people move to a country without capital gains tax to sell their company. Obviously I don't know Finnish tax law, but within the EU it's generally the case (for now). Have it checked by a _GOOD_ tax lawyer, if that's what you want to do. Building up capital is important - once you have it there's a lot you can do.
Swizec 10y ago
As others have mentioned, financial independence isn't hard. The hard part is financial independence without lifestyle compromises. I'm making roughly $2k/month with books and workshops. The marketing and content producing takes about 2h/day on average. It makes my life a lot easier and less stressful. But rent alone is $3500 in this stupid city (San Francisco). So I still need a day job for now.
- erikb 10y ago
  > The hard part is financial independence without lifestyle compromises. My point exactly. But I also think you don't need to live in one of the most expensive cities of this planet. A few lifestyle changes should be acceptable, though. I would say if you spend more than $50k/year it should be possible to have quite a good life with some modifications.
  - sotojuan 10y ago
    Until remote working becomes more common, living in a big city has a lot of benefits for a tech worker. Even with the higher living cost, I make a lot more than back home in Texas. Sadly just not enough to become independent :-)
    - erikb 10y ago
      Agreed. But there are many many cities that are big and a lot cheaper than SF, NYC etc.
- SmellTheGlove 10y ago
  What genre of books and workshops? Might as well sell us a book here!
repomies691 10y ago
A mix of consulting, products and bitcoin. Happened to just be in a right place at the right time, and took (mostly) the right risks. Basically I went from zero net worth to 2-3 million liquid, within about 7 years. Also have some other illiquid assets which could be worth more or less. First I started with consulting, then slowly started developing different apps/products/services, and funded the development from consulting/contracting income. Soon the products themselves gave me 2-3k/month, and I didn't need to do that much consulting any more. As Bitcoin came, I already had some money to invest. I lived very frugally, and invested heavily in Bitcoin when it was around $10 or something. Also I have invested in stocks/ETF:s/etc all the time but those play pretty minor role. Mostly got one thing right.
- zen_boy 10y ago
  Are you also from Finland? Would love to share stories and insights! You can find my contact info on alexhanh.com, if you are interested to talk. :)
timwaagh 10y ago
I'm trying to get closer to this goal by renting out rooms in my house. It's not something that a lot of people do and there are legal issues. however it does get me a nice amount of passive income. this is about 1k EUR per month. I'm hoping to get it up to the level of my salary (1700 EUR) within the next year.
doc_holliday 10y ago
Related, I am wondering if any of you have any tips on securing financial independence / passive income that will hopefully be Tech recession proof. I.e, best way to see yourself through a Tech downturn without taking a severe hit to your wealth. I say this because I've had recent experience with people losing huge amounts of their wealth, and almost going bankrupt during the Oil price crash. For instance I know Oil workers who had most of their wealth in oil company shares, a house in an oil related city and lose their oil industry job. I'd imagine their are lots in tech that are the same, large amount of Tech shares, a house in the Bay area and a job in Tech. Anyone got any tips on diversifying for a downturn? What shares (if any???) are likely to do well if Tech has a bad patch.
- Chrisjay 10y ago
  I think farmland still has a ways up to go - that could mean a spot in the country, a share of a working farm, or a financial vehicle like AGRO. I'm not financially independent though, so take my advice with a grain of salt.
- tim333 10y ago
  Things like utility stocks tend to hold up. In the 99 crash Berkshire Hathaway was countercyclical and hit a low on the day tech stocks peaked. Also oil stocks were roughly negatively correlated with tech in 99 and may be today. Reasonably priced property not in the bay area?
- SmellTheGlove 10y ago
  Well, it doesn't help me at all in the tech job market, but my primary residence is 0.75 miles from the beach in the Northeast (Maine). At some point I'm pretty sure we'll move one more time for a career opportunity, at which point this becomes the 2nd home and an investment. We weren't really part of the housing bubble or the collapse here - things just kind of kept moving along at reasonable rates of appreciation. As a result, there aren't any bargains here, but I know a few people with similarly located homes renting them by the week in the summer to tourists and keeping them completely vacant from October-April. I'd like to get another property up here. Now, if you're talking about market investments, do yourself a favor and diversify. Just hold indexes and keep your expenses low if you don't quite know what you're doing. That said, disclaimer, I'm not financially independent. I very much need my job, as I have a mortgage and student debt from law school, plus a child and probably having 1 more in the next couple of years. I'm nearly certain I'll never be financially independent, since I'm really trying to set that up for my children instead. I have no idea what college will cost in 15-20 years, but I see the direction it's headed and my financial plans are more around making sure they come out of school debt free. My folks did that for me, but then I was dumb enough to go to law school in 2005. I really can't complain, I have a pretty solid career doing fintech and data for a large company, but it's one major expense I could have avoided and been okay - although it does check the "advanced degree" box. I have some side projects and more coming, but if I make a few dollars there, it goes directly to my kids' savings. I do have US and EU passports, so there's potentially that option for retirement with affordable healthcare and housing, but that's projecting years down the road.
samsonradu 10y ago
Doing pretty well from consulting these days, however I can't manage to generate any passive income. Having saved about 30k in the past years doesn't seem to help either, interest rates are ridiculously low. Stocks and bonds are not really my area of expertise so I decided to stick to cash. Investment funds might be an option in the nearby future.
- maaaats 10y ago
  Just buy index funds. They have low fees, and beat most (if not all) managed funds long term anyway. Find a fond tracking S&P 500, one global and maybe some other markets, and you should be set.
  - aminorex 10y ago
    Keep in mind that index funds will probably decline by about 3-4x over the next 10 years on the demographic cycle.
    - maaaats 10y ago
      What do you mean?
      - aminorex 10y ago
        There's a good San Francisco FRB white paper on it. Should be an easy Google whack. Boomers sell the world during their retirement burn.
        cjlm 10y ago
        A link would be useful.
    - cylinder 10y ago
      How can something "decline 3x?" Lol.
pauljaworski 10y ago
Not me, but the last time I talked to the CTO of my last company, he was making ~$120k/year passively via LendingClub with ~$1M invested (which he acquired via our exit).
- chillydawg 10y ago
  There was a UK equivalent of that but it got pretty rubbish. The rates dropped very low as too many people with cash were chasing too many borrowers. It got to the point that, even with a 10% loan portfolio, you might not make money as the borrowers were so bad.
- rufius 10y ago
  Has he reevaluated his investment at all with them since some of their sketchy business? I've been trying to decide with the chunk of money I have invested there.
  - pauljaworski 10y ago
    I don't know the full details of how they inflated the creditworthiness of their lendees, but I do know that he wrote his own software to determine that and offer loans based on his own criteria. I'm not sure if he was actually affected by what they did.
maaaats 10y ago
I haven't achieved it, but I'm taking the safe route: Avoid lifestyle creep. Invest as much as I can for long-term gains (index funds, bonds etc.). Then live off slowly selling it off. So no passive income from a business. (I feel most people claiming "passive income" from those are actually working on them anyway, though) By living off 50% of my paycheck, I can invest 50%. This roughly means for each year I work, I have one year saved up. However, after saving up many years, interest of interests have accumulated, so the first year I saved gives me more free years when I choose to "spend it". That's how I think about it, for the math, safe withdrawal rate etc. reddits r/financialindependence has a lot of resources. Most can achieve FI on modest income, so as a developer it should be double-doable.
deleted 10y ago
[deleted]
anonu 10y ago
In the USA the surest and safest way to do this is to follow the American Dream... ie: buy a house. Specifically, buy a multi-family in a constantly in-demand area / big city. The devil is in the details on the economics of all this... how much you put down vs how much you borrow, etc.. etc... But within 30 years (assuming you get a 30-year mortgage) you will certainly be financially independent. The key is to manage this wisely and ensure you are in a location where you can get near 0% vacancy. Why am I so sure this will work? Because the US economy is designed for this... it's designed to massively leverage yourself up against the collateral of the home. The tax code is designed to basically writeoff your expenses - and even more so if it is your primary residence.
- vegasje 10y ago
  Any areas specifically come to mind?
  - anonu 10y ago
    Austin, Portland. anywhere near a large university. university enrollment is counter-cyclical to the economy.
- cylinder 10y ago
  You deduct business interest and expenses from a business too. The difference is banks will loan you 5:1 on a multifamily but will not for a non-real estate small business. A multifamily is just a small business.
- mywittyname 10y ago
  The downside is that you need to be a landlord and this can be a risky proposition. You have to navigate a potential mine-field of tenant friendly regulations and pray that a tenant doesn't destroy your property.
known 10y ago
Wall street programmer :)
- aminorex 10y ago
  Super high burn rate. 200k is a slave wage in Manhattan, or in SFO bay for that matter.
  - whamlastxmas 10y ago
    #shitHNsays
    - aminorex 10y ago
      It's just true. You live like a galley slave at that rate. It takes about 300k to approximate the lifestyle that 40k can get you in Omaha.
      - mywittyname 10y ago
        What? No dude. $300k is still $16,000/mo net, worst case scenario. $40k is like $3k net, best case. So, unless it's impossible to live in SF for less than $13,000/mo, SF wins.
        aminorex 10y ago
        You can live like a king on 40k in Omaha. You can have a yard, a garage, drive a car, eat at restaraunts, shop at Walmart. In Manhattan some of that is inaccessible even to the very rich. There are no walmarts. Parking your car may cost 40k.
        cmaher 10y ago
        That's assuming all people want to live like that. I wouldn't know what do do with that much space, and I hate having to drive anywhere. Give me decent public transportation and access to world-class restaurants over a house and a yard and a car any day.
mark_l_watson 10y ago
I worked for a very large company for over 20 years, and the stock I received, bonus and standard issue, made my wife and I fairly much independently wealthy given our frugal life style. We spend a fortune on travel, otherwise we live on very little money. The other thing that helped was buying some income property when I was younger. Getting rent money from tenants every month is wonderful.
aminorex 10y ago
Income is superfluous if you have enough to burn for a hundred years or more. For me, it was as simple as buying some monero and relocating to a lake home: No city burn rates, and my stash rose 12x so far, with another 50x foreseeable in the baseline scenario, 10000x in extremely low-probability tail scenarios.
stevenmays 10y ago
I'm not yet. 31 years old and working on it. I have a good chunk of money invested, but my magic number is 1 million and a paid off rental (maybe 2) + 1 primary residence. I have 12 years left on my mortgage. This house will eventually become one of my rentals. The idea is just to reduce expenses a ridiculous amount and invest everything in the stock market + rentals. I should reach my goal by 40 - 45.
rizn 10y ago
I consider myself as financially independent. I worked for a number of years in London as IT contractor (£400-500pd). Then I moved back to my home country and my hometown in Poland (reasonably affordable, not a capital). I don't have a car and I try to keep my spending to minimum (no fancy holidays, which I don't need. I cook, etc). I try to ensure my spending doesn't exceed equivalent of €500 a month. I still spend most of the day in front of the computer. The only difference is that I wake up and finish when I want. I work on my personal projects (without aim to make money), which I find more interesting than doing commercial CRUD apps. My decision was largely influenced by a Danish guy living in the USA, who wrote this blog: www.earlyretirementextreme.com
ekr 10y ago
Obligatory link to ERE Journals : http://forum.earlyretirementextreme.com/viewforum.php?f=9&sid=8c02ee36bb6309086a0184db619cfe9b http://forum.earlyretirementextreme.com/viewforum.php?f=9&si... You can read tens of life stories centered around early retirement/ financial independence there.
coverclock 10y ago
1. Started working full time at 19. 2. Still alive at 60. 3. Worked hard in every job. 4. Maximized retirement contributions. 5. Only owned two houses. 6. Paid off current home as quickly as possible. 7. No debt other than credit card paid off monthly. 8. Only married once (and still) 32 years ago. 9. Spousal unit has same fiscal strategy as me. 10. We never had kids. We can both afford not to work, although we both choose to. I can't say we're especially frugal. I own four Swiss mechanical watches, a brand new Subaru WRX Limited, and lots of other toys, and have traveled all over the world, all of which I paid cash for (or paid card off each month).
alecco 10y ago
Watch out for Survivor Bias. Ask how people aimed to FI and failed, too.

187 points by tsaprailis 10y ago

I know this is a niche question, but have you reached a point where you have enough passive income to not to have to work for a living? If so how did you accomplish it?

EliRivers 10y ago

I can pay my rent and bills from investment income and capital gain on investments. This is, of course, not remotely guaranteed, but over the last few years it's worked out. I do still work, though. I did it by putting large amounts of my income into low cost index funds focussing on various sectors, and some specific shares that I thought would do well.

tsaprailis 10y ago
Thanks for the feedback. Could you clarify if you only use the capital gains? I have read that dividend stocks are also a good way to have a passive income. Additionally have you thought about what you would do in case of a market downturn?
- EliRivers 10y ago
  Currently, I don't use any of it. I keep track of the gains (which is how I know they outweigh my rent and bills), but because I still work, I pay the rent and bills out of wages and leave the investments alone. All my dividends get reinvested. I'm in the UK, and I've taken full advantage of the tax free savings scheme, currently allowing about 15000 GBP a year to be put into stocks and funds with no tax to pay on dividends or gains. There have been market downturns during the time I've done this (started around 2005). Generally, during a downturn, I scrape together as much spare cash as I can and invest it in things that seem cheap. April 2015 to April 2016 was something of a downturn, for example, and I ploughed extra money into the markets while prices were low.
- n72 10y ago
  Dividend stocks are not a good way to have passive income. The benefit of the dividend is already priced into the stock, so they are no better than any other stock. Prefer, rather, to just go for good stocks and not worry about the dividend. If you need income, sell some stocks. Also, the % that you're pulling out of stocks should be determined by looking at, say, a 30 year window, not a very recent one. That is, if your savings can sustain a 2% withdraw every year, taking into account inflation, then take out 2% every year. Some years this will be less that your cap gains and some years more. The key is making a long term outlook. FWIW, these are some very brief thoughts of mine on investment: https://github.com/nickgieschen/investingguidelines https://github.com/nickgieschen/investingguidelines
  - EliRivers 10y ago
    "The benefit of the dividend is already priced into the stock, so they are no better than any other stock." I hear this sort of thing a lot, and in my experience, everything already being priced in isn't true (both of dividend stocks, and stocks not paying dividends). This relies on the efficient market hypothesis being broadly correct, and based purely on my own experience, it isn't. My findings are very much based on my own experience, but I have had no small success simply reading the news and seeing that a company is doing well or is looking at a brighter future, and buying shares in them and making a nice profit on it out of both increased share price and increasing dividends. The EMH suggests that it shouldn't work; that by the time I get round to buying the shares, the efficient market has priced all that in. But it just doesn't seem to be true, in my experience.
    - n72 10y ago
      You're talking about two different things: Stock picking and whether dividends are priced in. Because stock picking works for you (let's ignore the sample size issue), doesn't mean dividends aren't priced in.
      - EliRivers 10y ago
        I believe that dividends are not priced in. The reason I believe this is not related to stock picking working for me. I believe it because the market is not efficient, and dividends being priced in relies on an efficient market. Any success I have in stock picking relies on this inefficiency; it's just a symptom.
        tonyedgecombe 10y ago
        If dividends weren't priced in then prices wouldn't dip when stocks go ex-dividend.
        EliRivers 10y ago
        Sometimes they don't. Sometimes they go up. Lots of people think they're priced in, and the point at which they go ex-dividend is a convenient point to decide that it's now worth a bit less. Was it "priced in" before? No idea. Going ex-dividend is a single, identifiable point at which people can say it surely must be worth less now. I personally value dividend paying stocks more highly than non-dividend paying stocks. A history of dividends makes the stock appear more valuable to me (given that the majority of companies are rubbish at investing in themselves, giving me the money and letting me reinvest it myself is preferable). If they just went ex-dividend, that's a excellent very fresh data point that makes the stock look more valuable to me.
deleted 10y ago
[deleted]

mikekchar 10y ago

I'm only responding because nobody else has replied to your thread. Feel free to ignore me if you think it is irrelevant. My favourite Dr. Who quote: "Work for? I don't work for anyone. I'm just having fun." Describes me, even though I receive money every month. My expenditures are considerably less than the money I receive every month by having fun. If I didn't receive money, then I would be in trouble, so I don't really qualify for your question, but I'm having fun so I'll answer anyway. Step #1. Reduce my expenditures below what most people consider reasonable. I lived for more than 5 years on less than $10K a year. It was much easier than I thought. I discovered that spending more than this amount of money, I was no happier. Who knew? What really counted was having so much more income than outgo that money became completely irrelevant to me. After I did that, I stopped worrying about working. There isn't a job in the 1st world that pays less money than I'm comfortable with. I started taking jobs that interested me instead of jobs that paid me money. Then I got married. That threw a monkey wrench into the works! But I'm slowly working thought that ;-) Honestly, people tie themselves to a grindstone to make as much money as possible because they think it will remove stress and give them a nice life. I don't think that works most of the time.

tsaprailis 10y ago
Thanks for your reply. I was thinking about the same, while I make more than I spend, and for the time being I can save money, this indeed requires working. The "problem" would start when you have depended family members and you cannot calculate, or rather plan for all expenses in advance, what have you done to plan for this?
- mikekchar 10y ago
  Yes, this is a problem. I think the biggest thing I fear is poor health. I live in Japan which has a health care system, but it can still be quite expensive to be ill. Also, my wife and I won't have children probably, so while that saves money up front, I have nobody to look after me when I get old. Insurance is my main hedge against these risks. I try to follow a healthy lifestyle as well. I used to keep fish and it's amazing how much longer fish live when they aren't stressed. I try to replicate that. Finally I try to buy long term, low risk investments (like government bonds) with my excess cash. However, I keep a few years worth of money available in liquid assets for things like disability. Probably the biggest risk is getting a mental illness that isn't covered by long term disability insurance. I have no idea how to deal with that one :-( All of my skills to live simply may be useless if I lose the mental ability to use them.

Dragon256 10y ago

Forces pension, various websites, P2P lending (ZOPA, Funding Circle, Lend Invest, etc) and soon (hopefully) Bonds & shares via CrowdCube.

tsaprailis 10y ago
Thanks, do these provide a passive income or just capital gains?

malcolmocean 10y ago

I described this in pretty great detail over on IndieHackers (https://indiehackers.com/businesses/complice https://indiehackers.com/businesses/complice) and also answered a bunch of related questions on this HN thread: https://news.ycombinator.com/item?id=12269425 https://news.ycombinator.com/item?id=12269425 TL;DR = spent 20h/week for 2 years building a product that people wanted. But there are a lot of juicy insights etc in those links.

tsaprailis 10y ago
Thanks for the links, I will take a look. Your story seems like what I have in mind trying to replicate.

zen_boy 10y ago

Just turned 30. Invested most of my savings (20k€) into Bitcoin several years ago, and then converted everything to Ethereum in the pre-sale. Those 20k€ are worth roughly 1M€ pre-tax at the current rates. Started a fintech startup three years ago and we are close to a liquidation event that would net ~1.5M€ pre-tax. Right now, though, I have less than 10k€ in my bank account. Would be also really curious to hear how to convert that money into sustainable passive income. Spending 3k€ per month for the next 30 years would be about 1M€. Seems like having <5M€ is far from the "go bananas" type of wealth, but it can definitely be enough to achieve FI. Achieving ~4% annualized ROI after tax and inflation seems plausible in the long term: https://www.reddit.com/r/financialindependence/wiki/faq https://www.reddit.com/r/financialindependence/wiki/faq

charlesdm 10y ago
Is capital gains tax payable on those coins? If I were in your place, I would probably attempt to find a way to realise that gain (i.e. by relocating to a tax friendly country for a while) without having to pay capital gains tax. Make sure to not throw away your windfall.
- zen_boy 10y ago
  In Finland, the capital gains on cryptos are realised once you sell them for floating currencies (ie. USD or EUR). We pay 34% tax on the profit. For example, I'd pay (1M€ - 20k€) x 34% = 333k€ of taxes on capital gains. I'm not sure how the taxation works if you try to dodge it by relocating to a more tax friendly zone. I've heard some horror stories about Finnish companies moving to Estonia for tax benefits only to be taxed with fines for the gains that the company made while it located in Finland. Would the same rationale apply for personal capital gains? You can freely trade between cryptos, for example between BTC and ETH, without triggering the capital gains. The moment you leave cryptoland, I believe they use the first-in-first-out (FIFO) principle to calculate the profits.
  - charlesdm 10y ago
    In Belgium (where I live), these gains are tax free. So that is one country you could potentially move to to avoid the tax. The same applies for the UK, Malta, Cyprus (non dom regime) and Monaco. If I were you, I'd consider doing the perpetual traveler thing for a while (i.e. while having a base in Malta, which is cheap) and cash out + reinvest in stocks. After a few years, move back, and then pay capital gains tax on those future gains. You can leave most countries without realising the capital gain, even if you've built it up within a country. This is why certain people move to a country without capital gains tax to sell their company. Obviously I don't know Finnish tax law, but within the EU it's generally the case (for now). Have it checked by a _GOOD_ tax lawyer, if that's what you want to do. Building up capital is important - once you have it there's a lot you can do.

Swizec 10y ago

As others have mentioned, financial independence isn't hard. The hard part is financial independence without lifestyle compromises. I'm making roughly $2k/month with books and workshops. The marketing and content producing takes about 2h/day on average. It makes my life a lot easier and less stressful. But rent alone is $3500 in this stupid city (San Francisco). So I still need a day job for now.

erikb 10y ago
> The hard part is financial independence without lifestyle compromises. My point exactly. But I also think you don't need to live in one of the most expensive cities of this planet. A few lifestyle changes should be acceptable, though. I would say if you spend more than $50k/year it should be possible to have quite a good life with some modifications.
- sotojuan 10y ago
  Until remote working becomes more common, living in a big city has a lot of benefits for a tech worker. Even with the higher living cost, I make a lot more than back home in Texas. Sadly just not enough to become independent :-)
  - erikb 10y ago
    Agreed. But there are many many cities that are big and a lot cheaper than SF, NYC etc.
SmellTheGlove 10y ago
What genre of books and workshops? Might as well sell us a book here!

repomies691 10y ago

A mix of consulting, products and bitcoin. Happened to just be in a right place at the right time, and took (mostly) the right risks. Basically I went from zero net worth to 2-3 million liquid, within about 7 years. Also have some other illiquid assets which could be worth more or less. First I started with consulting, then slowly started developing different apps/products/services, and funded the development from consulting/contracting income. Soon the products themselves gave me 2-3k/month, and I didn't need to do that much consulting any more. As Bitcoin came, I already had some money to invest. I lived very frugally, and invested heavily in Bitcoin when it was around $10 or something. Also I have invested in stocks/ETF:s/etc all the time but those play pretty minor role. Mostly got one thing right.

zen_boy 10y ago
Are you also from Finland? Would love to share stories and insights! You can find my contact info on alexhanh.com, if you are interested to talk. :)

timwaagh 10y ago

I'm trying to get closer to this goal by renting out rooms in my house. It's not something that a lot of people do and there are legal issues. however it does get me a nice amount of passive income. this is about 1k EUR per month. I'm hoping to get it up to the level of my salary (1700 EUR) within the next year.

doc_holliday 10y ago

Related, I am wondering if any of you have any tips on securing financial independence / passive income that will hopefully be Tech recession proof. I.e, best way to see yourself through a Tech downturn without taking a severe hit to your wealth. I say this because I've had recent experience with people losing huge amounts of their wealth, and almost going bankrupt during the Oil price crash. For instance I know Oil workers who had most of their wealth in oil company shares, a house in an oil related city and lose their oil industry job. I'd imagine their are lots in tech that are the same, large amount of Tech shares, a house in the Bay area and a job in Tech. Anyone got any tips on diversifying for a downturn? What shares (if any???) are likely to do well if Tech has a bad patch.

Chrisjay 10y ago
I think farmland still has a ways up to go - that could mean a spot in the country, a share of a working farm, or a financial vehicle like AGRO. I'm not financially independent though, so take my advice with a grain of salt.
tim333 10y ago
Things like utility stocks tend to hold up. In the 99 crash Berkshire Hathaway was countercyclical and hit a low on the day tech stocks peaked. Also oil stocks were roughly negatively correlated with tech in 99 and may be today. Reasonably priced property not in the bay area?
SmellTheGlove 10y ago
Well, it doesn't help me at all in the tech job market, but my primary residence is 0.75 miles from the beach in the Northeast (Maine). At some point I'm pretty sure we'll move one more time for a career opportunity, at which point this becomes the 2nd home and an investment. We weren't really part of the housing bubble or the collapse here - things just kind of kept moving along at reasonable rates of appreciation. As a result, there aren't any bargains here, but I know a few people with similarly located homes renting them by the week in the summer to tourists and keeping them completely vacant from October-April. I'd like to get another property up here. Now, if you're talking about market investments, do yourself a favor and diversify. Just hold indexes and keep your expenses low if you don't quite know what you're doing. That said, disclaimer, I'm not financially independent. I very much need my job, as I have a mortgage and student debt from law school, plus a child and probably having 1 more in the next couple of years. I'm nearly certain I'll never be financially independent, since I'm really trying to set that up for my children instead. I have no idea what college will cost in 15-20 years, but I see the direction it's headed and my financial plans are more around making sure they come out of school debt free. My folks did that for me, but then I was dumb enough to go to law school in 2005. I really can't complain, I have a pretty solid career doing fintech and data for a large company, but it's one major expense I could have avoided and been okay - although it does check the "advanced degree" box. I have some side projects and more coming, but if I make a few dollars there, it goes directly to my kids' savings. I do have US and EU passports, so there's potentially that option for retirement with affordable healthcare and housing, but that's projecting years down the road.

samsonradu 10y ago

Doing pretty well from consulting these days, however I can't manage to generate any passive income. Having saved about 30k in the past years doesn't seem to help either, interest rates are ridiculously low. Stocks and bonds are not really my area of expertise so I decided to stick to cash. Investment funds might be an option in the nearby future.

maaaats 10y ago
Just buy index funds. They have low fees, and beat most (if not all) managed funds long term anyway. Find a fond tracking S&P 500, one global and maybe some other markets, and you should be set.
- aminorex 10y ago
  Keep in mind that index funds will probably decline by about 3-4x over the next 10 years on the demographic cycle.
  - maaaats 10y ago
    What do you mean?
    - aminorex 10y ago
      There's a good San Francisco FRB white paper on it. Should be an easy Google whack. Boomers sell the world during their retirement burn.
      - cjlm 10y ago
        A link would be useful.
  - cylinder 10y ago
    How can something "decline 3x?" Lol.

pauljaworski 10y ago

Not me, but the last time I talked to the CTO of my last company, he was making ~$120k/year passively via LendingClub with ~$1M invested (which he acquired via our exit).

chillydawg 10y ago
There was a UK equivalent of that but it got pretty rubbish. The rates dropped very low as too many people with cash were chasing too many borrowers. It got to the point that, even with a 10% loan portfolio, you might not make money as the borrowers were so bad.
rufius 10y ago
Has he reevaluated his investment at all with them since some of their sketchy business? I've been trying to decide with the chunk of money I have invested there.
- pauljaworski 10y ago
  I don't know the full details of how they inflated the creditworthiness of their lendees, but I do know that he wrote his own software to determine that and offer loans based on his own criteria. I'm not sure if he was actually affected by what they did.

maaaats 10y ago

I haven't achieved it, but I'm taking the safe route: Avoid lifestyle creep. Invest as much as I can for long-term gains (index funds, bonds etc.). Then live off slowly selling it off. So no passive income from a business. (I feel most people claiming "passive income" from those are actually working on them anyway, though) By living off 50% of my paycheck, I can invest 50%. This roughly means for each year I work, I have one year saved up. However, after saving up many years, interest of interests have accumulated, so the first year I saved gives me more free years when I choose to "spend it". That's how I think about it, for the math, safe withdrawal rate etc. reddits r/financialindependence has a lot of resources. Most can achieve FI on modest income, so as a developer it should be double-doable.

deleted 10y ago

[deleted]

anonu 10y ago

In the USA the surest and safest way to do this is to follow the American Dream... ie: buy a house. Specifically, buy a multi-family in a constantly in-demand area / big city. The devil is in the details on the economics of all this... how much you put down vs how much you borrow, etc.. etc... But within 30 years (assuming you get a 30-year mortgage) you will certainly be financially independent. The key is to manage this wisely and ensure you are in a location where you can get near 0% vacancy. Why am I so sure this will work? Because the US economy is designed for this... it's designed to massively leverage yourself up against the collateral of the home. The tax code is designed to basically writeoff your expenses - and even more so if it is your primary residence.

vegasje 10y ago
Any areas specifically come to mind?
- anonu 10y ago
  Austin, Portland. anywhere near a large university. university enrollment is counter-cyclical to the economy.
cylinder 10y ago
You deduct business interest and expenses from a business too. The difference is banks will loan you 5:1 on a multifamily but will not for a non-real estate small business. A multifamily is just a small business.
mywittyname 10y ago
The downside is that you need to be a landlord and this can be a risky proposition. You have to navigate a potential mine-field of tenant friendly regulations and pray that a tenant doesn't destroy your property.

known 10y ago

Wall street programmer :)

aminorex 10y ago
Super high burn rate. 200k is a slave wage in Manhattan, or in SFO bay for that matter.
- whamlastxmas 10y ago
  #shitHNsays
  - aminorex 10y ago
    It's just true. You live like a galley slave at that rate. It takes about 300k to approximate the lifestyle that 40k can get you in Omaha.
    - mywittyname 10y ago
      What? No dude. $300k is still $16,000/mo net, worst case scenario. $40k is like $3k net, best case. So, unless it's impossible to live in SF for less than $13,000/mo, SF wins.
      - aminorex 10y ago
        You can live like a king on 40k in Omaha. You can have a yard, a garage, drive a car, eat at restaraunts, shop at Walmart. In Manhattan some of that is inaccessible even to the very rich. There are no walmarts. Parking your car may cost 40k.
        cmaher 10y ago
        That's assuming all people want to live like that. I wouldn't know what do do with that much space, and I hate having to drive anywhere. Give me decent public transportation and access to world-class restaurants over a house and a yard and a car any day.

mark_l_watson 10y ago

I worked for a very large company for over 20 years, and the stock I received, bonus and standard issue, made my wife and I fairly much independently wealthy given our frugal life style. We spend a fortune on travel, otherwise we live on very little money. The other thing that helped was buying some income property when I was younger. Getting rent money from tenants every month is wonderful.

aminorex 10y ago

Income is superfluous if you have enough to burn for a hundred years or more. For me, it was as simple as buying some monero and relocating to a lake home: No city burn rates, and my stash rose 12x so far, with another 50x foreseeable in the baseline scenario, 10000x in extremely low-probability tail scenarios.

stevenmays 10y ago

I'm not yet. 31 years old and working on it. I have a good chunk of money invested, but my magic number is 1 million and a paid off rental (maybe 2) + 1 primary residence. I have 12 years left on my mortgage. This house will eventually become one of my rentals. The idea is just to reduce expenses a ridiculous amount and invest everything in the stock market + rentals. I should reach my goal by 40 - 45.

rizn 10y ago

I consider myself as financially independent. I worked for a number of years in London as IT contractor (£400-500pd). Then I moved back to my home country and my hometown in Poland (reasonably affordable, not a capital). I don't have a car and I try to keep my spending to minimum (no fancy holidays, which I don't need. I cook, etc). I try to ensure my spending doesn't exceed equivalent of €500 a month. I still spend most of the day in front of the computer. The only difference is that I wake up and finish when I want. I work on my personal projects (without aim to make money), which I find more interesting than doing commercial CRUD apps. My decision was largely influenced by a Danish guy living in the USA, who wrote this blog: www.earlyretirementextreme.com

ekr 10y ago

Obligatory link to ERE Journals : http://forum.earlyretirementextreme.com/viewforum.php?f=9&sid=8c02ee36bb6309086a0184db619cfe9b http://forum.earlyretirementextreme.com/viewforum.php?f=9&si... You can read tens of life stories centered around early retirement/ financial independence there.

coverclock 10y ago

1. Started working full time at 19. 2. Still alive at 60. 3. Worked hard in every job. 4. Maximized retirement contributions. 5. Only owned two houses. 6. Paid off current home as quickly as possible. 7. No debt other than credit card paid off monthly. 8. Only married once (and still) 32 years ago. 9. Spousal unit has same fiscal strategy as me. 10. We never had kids. We can both afford not to work, although we both choose to. I can't say we're especially frugal. I own four Swiss mechanical watches, a brand new Subaru WRX Limited, and lots of other toys, and have traveled all over the world, all of which I paid cash for (or paid card off each month).

alecco 10y ago

Watch out for Survivor Bias. Ask how people aimed to FI and failed, too.